Once upon a time, buying a car was straightforward – an often enjoyable, though occasionally fraught, lesson in the art of negotiation.
The buyers’ objective was to try and discover just how much less than the price displayed on the vehicle’s windscreen they could acquire it for. The dealer, meanwhile, knew how much leeway there was in the price and would seek to justify it by highlighting the vehicle’s attractive features.
As an occasional car buyer, I was told there are two keys to success: investing time in the negotiating process, a strategy that may require a return visit to continue the negotiation; and never fall in love with the car – be prepared to walk away from the deal.
How times have changed. Today, selecting a new car is the easy bit. Financing it has become considerably more complicated, especially as interest rates have been gradually edging upwards.
A quick check online shows that interest charged on car loans generally cost between 11% and 19.9%, although one well-known high street bank charges borrowers up to 29.9%. Interest rates may have risen recently, but they’ve only gone up to 1.75%, not 20%.
Britons enjoy a complex relationship with cars, not least because it’s likely to be one of the most expensive purchases to which we commit. Yet becoming obsessed with the price of a car is perhaps the biggest and most expensive mistake buyers make.
People frequently buy a car and believe that’s the end of the matter even though their new vehicle will often cost considerably more than they planned to spend. There’s maintenance, MOT, insurance costs, fuel, parking and regular cleaning to begin with, yet too many folks do not have a realistic understanding of how much more it will actually cost to own it.
Online car experts maintain that you should never spend more than 10% of your gross annual income on buying a car, thanks to the long list of additional outgoings you’re virtually guaranteed to incur.
On top of this are maintenance and similar costs that will leave a hole in your purse or wallet. Indeed, the more frequently you’re behind the wheel, the higher you can expect your maintenance bill to be. Given that a vehicle is made up of thousands of moveable and fixed parts, it’s almost inevitable that one or more will eventually break, leak or require an expensive upgrade. I recently spent £400 on two new tyres – about £150 more than I had anticipated.
As interest rates continue to rise, buying or leasing a car is becoming more expensive and there’s no sign of rates suddenly falling, while inflation remains a threat. Moreover, the pleasure of buying a car – it doesn’t have to be brand new – wears off after a while, although paying for it is a process that usually lasts for years.
“Given how fast prices are rising, it’s important that motorists take the time to reduce their car-related costs wherever they can,” says Ken Carter, head of Insurance Services at personal finance website Moneymapp.com.
“As the cost of fuel went through the roof over the summer, we saw how careful many drivers became in a successful bid to save fuel. But while motorists can put expenditure on small luxuries such as valeting on hold, they cannot avoid fixed costs including car tax or parking tickets,” he adds.
Annual car insurance costs are another matter – because they can be reduced.
Mr Carter points out that as the Moneymapp platform reviews the cost of car insurance at more than 100 insurance companies on behalf of everyone who logs on to get an instant quote, motorists can enjoy savings of up to £319.03 on their annual insurance costs.
“We don’t ask for your mother’s maiden name, inside leg measurement or any other nonsense when you visit Moneymapp – we just want drivers to get the best possible quote for their car insurance. It’s that simple,” says Mr Carter.
If only everything associated with car ownership was as straightforward.
For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.
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